Maybe the GSEs won’t be able to help, after all. That seems to be the sentiment circulating among investors, at least, who have been voting with their pocketbooks all week, pummeling both Fannie Mae (FNM) and Freddie Mac (FRE) over concerns that both government-sponsored enterprises don’t have the ability to backstop a flailing housing market — and may not have the capital needed to manage the risk inherent in each company’s existing book of business. Freddie Mac, below $10 per share? Believe it. Shares in Freddie dipped to $9.84 in pre-market trading Thursday, off more than 4 percent from Wednesday’s close. Sister GSE Fannie Mae wasn’t far behind Thursday morning, either, down 2.61 percent to $14.91 in pre-market activity. Both companies led a broader downturn in the U.S. stock market on Thursday that sent the Standard & Poor’s 500 Index into bear market territory for the first time since 2002. The ills afflicting both Fannie and Freddie certainly are unsettling to many mortgage market participants, to understate matters — both GSEs were trading comfortably in the $60 range as recently as late last year, as investors and Congress alike saw both companies as critical to the housing market’s functioning. Those days appear to be a memory now, even as some seasoned market participants wonder just what has really bitten both mortgage financial giants. Freddie Mac CEO Richard Syron said yesterday in an interview that the fire sale in GSE share prices this week was the result of little more than investor fear. Both he and Office of Federal Housing Enterprise Oversight director James Lockhart intimated that a change in accounting standards governing asset classification — a specter raised earlier in the week by a Lehman Brothers Holdings Inc. (LEH) report — would mean little to either firm’s capital requirements. “A huge share of this is panic,” Syron said in an interview published by American Banker earlier this week. “Markets are moved by information, but in periods like this, they are also moved by fear.” Perhaps. But most market participants have known for some time that both GSEs are face capital constraints; media reports Thursday morning suggest that at least some well-known figures are now questioning both Fannie and Freddie’s solvency, whether warranted or not — and regulators are clearly taking the woes at both housing GSEs seriously. Former St. Louis Federal Reserve president William Poole, himself a long-time critic on both Fannie and Freddie, piled onto investors’ concerns Wednesday evening in an interview reported by Bloomberg News, suggesting that the government would need to step in and explicitly guarantee both Fannie and Freddie’s mortgage obligations. “Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer,” Poole said in the interview. Spokepeople for both Fannie and Freddie scoffed at Poole’s remarks, according to various published reports. Officials at the Treasury have held discussions for months around regarding what to do if both GSEs falter, the Wall Street Journal reported Thursday morning; it’s not clear what those discussions have yielded, and at what point government officials would feel the need to step in. Federal officials have sought to calm investor nerves in recent days, as well; both Treasury secretary Henry Paulson and Federal Reserve chief Ben Bernanke have said the housing GSEs are well capitalized and that recent efforts to raise capital have been sufficient to shore up any concerns that may have existed. The real risk now, sources have told HW, isn’t that either GSE is de facto insolvent; it’s that both will be battered so badly by investors that they will have little choice but to run directly into Federal arms. “Bear Stearns wasn’t technically insolvent, the issue was thrust upon it by investors,” said one source, who asked not to be named in this story. “We could be facing a similar inflection point for Fannie and Freddie, and the sooner calmer nerves take hold, the better.” Disclosure: The author held no positions in publicly-traded firms mentioned herein when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.